US in recession, jobless to peak at 7.5%, Dollar mixed against major currencies

US in recession, jobless to peak at 7.5%: survey

2008-11-17 16:30:10

    BEIJING, Nov. 17 --

The US economy is in recession and will contract at a faster pace in the fourth quarter, extending the decline into early 2009 as high unemployment crimps consumer spending, a survey showed.

    The National Association of Business Economists' poll of 50 professional forecasters released on Monday found that real gross domestic product was expected to fall 2.6 percent in the fourth quarter and slump 1.3 percent in the first three months of 2009.

    Preliminary government estimates showed GDP contracted 0.3 percent in the third quarter. The results of the survey, which was conducted between October 28 and November 7 indicated growing pessimism among forecasters.

    "Business economists became decidedly more negative on the economic outlook for the next several quarters as a result of the intensification of credit market stresses and evidence of spillover to the real economy," said NABE President Chris Varvares.

    "Credit conditions continue to be tenuous. Despite the hefty liquidity injections by the Fed and the Treasury, the majority of NABE panelists believe that tight credit conditions will continue."

    A month ago, forecasters expected the economy to expand 0.1 percent in the fourth quarter, with the growth pace accelerating to 1.3 percent in the first quarter of 2009.

    Troubles in the US housing sector, emanating from the extension of loans to homeowners with poor credit history, have engulfed the broader economy, resulting in rising job losses and tight access to credit.

    Economy In Reccession

    About 96 percent of the NABE forecasters believed that the world's economic power house was already in recession. Half of them estimated the downturn started in the fourth quarter of 2007 or in the first quarter of 2008.

    More than a third reckoned the recession began in the third quarter of 2008, and nearly three-quarters believed it could persist beyond the first quarter of 2009. Over 60 percent expected the depth of the recession to be contained, with the decline in GDP bottoming below 1.5 percent.

    Overall GDP growth in 2008 was expected to come in at around 0.2 percent and top 0.7 percent next year, according to the survey. This compares with predictions of 1.2 percent and 2.2 percent respectively in October's survey.

    "With the recession continuing into 2009, GDP growth next year is expected to be a meager 0.7 percent. This would be the slowest growth over a two-year period since the early 1980s," said Varvares, who is also the president of Macroeconomic Advisers.

    Despite the gloomy economic outlook, the Federal Reserve would probably keep its benchmark overnight lending rate steady at 1 percent, raising it by 25 basis points in the last quarter of 2009, according to the survey.

    The unemployment rate was likely to peak at 7.5 percent by the third quarter of 2009, according to the survey. In the October poll, the jobless rate was seen topping out at 6.4 in the second quarter of next year.

    The unemployment rate rose to a 14-year peak of 6.5 percent in October. With the unemployment situation expected to deteriorate, consumer spending, which accounts for about two-thirds of economic activity, would remain depressed.

    With household spending weak, auto sales forecasts were slashed to 13.4 million units this year from October's estimate of 14.0 million. Sales for 2009 were likely to fall to 12.5 million instead of rising to 14.2 million, as had been predicted in the October survey.

    On an optimistic note, analysts said the housing sales rout was likely to bottom out by mid-2009, but a lot of uncertainty remains as new home inventories run at 10-months' supply, the survey found. Inflationary pressures would be contained as the economic downturn caps demand for oil, it showed.

    The Fed's preferred inflation measure, the core PCE index, was seen rising 1.8 percent over 2009, 0.2 percentage point lower than in the October survey. (Source: China Daily/Agencies)

Editor: Han

Dollar mixed against major currencies

2008-11-18 06:10:22  

    NEW YORK, Nov. 17 (Xinhua) --

The dollar rose against the euro but dipped against the pound on Monday as weak economic data added to recession worries and the weekend's global financial summit failed to boost market confidence.

    Analysts said the summit reshaped global politics and may eventually reshape the global economy. It offered developing countries such as China and India an important larger role in world financial system. But investors were a bit disappointed as the meeting didn't yield any concrete proposals for tackling the current financial crisis.

    The general business conditions index, a part of the Federal Reserve Bank of New York's Empire State manufacturing survey, slipped 0.8 point to a reading of minus 25.4 in November, a record low. It showed economic conditions in New York continued to deteriorate.

    Citigroup revealed plans to cut another 53,000 jobs in the coming quarters. The cuts affect 15 percent of the financial giant's work force, and are in addition to 23,000 jobs eliminated between earlier this year.

    Recession worries helped the dollar rising against the euro. However, the greenback fell against the pound as investors took profit. The British currency fell to a six year low against the dollar last week.

    The euro bought 1.2677 dollars in late New York trading compared with 1.2797 dollars it bought late Friday. The pound rose to 1.5023 dollars from 1.4949 dollars.

    The dollar rose to 1.1982 Swiss francs from 1.1852 Swiss francs, and fell to 96.50 Japanese yen from 97.57 Japanese yen. It rose to1.2225 Canadian dollars from 1.2186 Canadian dollars.

Editor: Yan